EQT Q4 2024 Earnings Call Summary

Overall Summary:

EQT had a strong operational quarter, benefiting from efficiency improvements and the integration of Equitrans Midstream, which they acquired in July. The company delivered production at the high end of guidance, reduced capital spending, and improved well productivity. EQT also reinforced its bullish stance on natural gas prices, highlighting a structural supply deficit due to underinvestment and a constrained pipeline system. The company maintained a cautious approach to production growth, instead prioritizing cost reductions and capital efficiency.

Tone of the Call:

The call had an optimistic and bullish tone toward the natural gas market, emphasizing tightening supply conditions, growing LNG demand, and Appalachian market strength. Management expects higher prices in 2025 and 2026, but acknowledged potential medium-term headwinds from increased Permian supply and Qatar LNG projects.

Management Commentary

1) Historical and Forecast Production Levels for Natural Gas

• 2024 Production:

  • 605 Bcfe for Q4 2024 at the high end of guidance.

  • Total 2024 production would have been 632 Bcfe (6.9 Bcf/d) if not for curtailments.

• 2025 Guidance:

  • 2,175 to 2,275 Bcfe with a midpoint of 2,225 Bcfe.

  • This represents an increase of 125 Bcfe over preliminary 2025 guidance.

• Efficiency Gains Impact:

  • EQT expects to turn in 10-15 fewer wells annually while maintaining production levels.

  • Well productivity gains drove 65 Bcf of outperformance in 2024.

2) Comments on Production Curtailments or Shut-Ins

• Market-Driven Curtailments:

  • “Had we not curtailed volumes in response to market conditions, our production would have exceeded the high end of our original guidance by 3%.”

  • Q4 2024 curtailments helped improve realized pricing by holding back gas during weaker price periods.

  • “This is the second consecutive quarter where curtailments materially outperformed realized pricing expectations.”

• Winter Curtailment Strategy:

  • “In January, we opened chokes on many wells, adding 300 MMcf/d of production into high-priced winter markets.”

3) Comments on TIL (Turned-in-Line) and DUC (Drilled but Uncompleted) Wells

• Reduced TIL Count Due to Efficiency Gains:

  • “We expect to turn in 10-15 fewer wells annually while maintaining current production levels.”

• Compression Investments Impacting TIL Plans:

  • "Compression improvements have accelerated production, reducing the need for new TIL wells."

• Southwest PA TIL Guidance for 2025:

  • 32 to 40 wells—all in the Marcellus. Deep Utica is not part of the plan.

4) Hedging Strategy, Realized Prices, and Break-Even Production Costs

• Hedging Strategy:

  • “We did not add any new hedges this quarter, as we remain bullish on gas prices.”

  • Hedging coverage declines to 40% in Q4 2025, and all hedges transition to collars with $5.50 ceilings in November 2025.

  • “We are completely unhedged in 2026, providing full exposure to a rising price environment.”

• Realized Prices:

  • Henry Hub Q4 2024 average: $2.81/MMBtu.

  • EQT’s differential was $0.13 tighter than expected due to curtailments.

• Break-Even Costs:

  • Operating costs were $1.07 per Mcfe, at the low end of guidance.

  • Well costs expected to fall by $70 per foot in 2025 compared to 2024.

5) Historical and Forward-Looking Rig and Frac Crew Numbers

• 2024 Operations:

  • Three frac crews operating for most of the year.

  • Q4 CapEx of $583 million—7% below the low end of guidance due to efficiency gains.

• 2025 Plans:

  • Dropping from three to two frac crews in April.

  • Running 2-3 rigs, down from three in 2024.

  • “This minimal level of activity juxtaposed against 7+ Bcf/d of production underscores our world-class assets.”

6) New Pipeline Builds, LNG Projects, and Other Energy Infrastructure

• Equitrans Midstream Integration:

  • 90% integration complete, with $200 million in annualized synergies captured.

  • "The Mountain Valley Pipeline (MVP) is running at 2 Bcf/d, contributing to tight Eastern storage conditions.”

• MVP Southgate Project:

  • Route shortened from 75 to 31 miles, reducing costs and environmental impact.

• LNG and Market Infrastructure:

  • No new major LNG export projects discussed, but EQT highlighted structural LNG-driven demand growth.

7) Comments on Market Activity and State of the Market

• Bullish Price Outlook for 2025-26:

  • “The market needs to balance inventories through demand destruction, given supply-side constraints.”

  • “Haynesville rig count remains too low to offset demand growth.”

• Potential Headwinds Beyond 2026:

  • “5 Bcf/d of new Permian pipeline capacity will come online in late 2026.”

  • “Qatar LNG will add 6 Bcf/d to the global market in 2027.”

8) LNG Flows and European Energy Markets

• European Gas Market Outlook:

  • "Even if a Russia-Ukraine peace deal happens, we don’t expect a major impact on European gas prices."

  • Gazprom litigation (up to $30 billion owed to EU utilities) remains unresolved.

  • “TTF pricing remains structurally supported by a lack of new Russian supply.”

• Appalachian Supply Constraints Benefiting Local Markets:

  • “MVP flows to max capacity at 2 Bcf/d this winter, tightening local storage.”

  • “Appalachian gas basis differentials have improved significantly.”

Q&A Highlights

1) Demand Growth and Pricing Trends

• Power and Data Center Demand:

  • EQT is in active discussions with hyperscalers and power producers to supply data center growth.

  • “Counterparty credit risk is a big factor—tech firms won’t sign with non-investment-grade suppliers.”

• Future Demand Growth:

  • "We expect 6-7 Bcf/d of incremental demand in Appalachia by 2030."

2) Future Growth Strategy

• EQT will only grow if demand is secured:

  • “We won’t grow into the strip price alone—we need firm demand commitments.”

3) Capital Allocation and M&A Strategy

• Debt Reduction vs. Buybacks:

  • “We are prioritizing debt reduction to $5B before major buybacks.”

  • “We will be opportunistic with buybacks when stock prices dip.”

• M&A:

  • “We are evaluating opportunities to apply our upstream-midstream model to acquire underperforming assets.”

Final Takeaways

• EQT is strongly positioned for 2025-26 with rising production efficiency and a bullish gas price outlook.

• Hedging strategy is highly flexible, allowing for full exposure to future price increases.

• Pipeline constraints and growing demand are supporting Appalachian gas prices.

• LNG flows and European market dynamics remain tight, favoring U.S. exports.